Risk Glossary

Name

Definition

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Stand-Alone Volatility

Stand-Alone Volatility is estimated using the backtest method. It is defined as being equal to the annualized standard deviation of the backtested returns. KeyQuant’s Risk Management Team uses 254 (number of trading days per annum) backtested daily returns exponentially weighted (α = 99%).

Ex-Ante Volatility is estimated using the current portfolio positions. We backtest the returns of the current portfolio and calculate the annualized volatility of this portfolio.
KeyQuant’s Risk Management Team uses 254 (number of trading days per annum) backtested daily returns exponentially weighted (α = 99%).

The Contribution to portfolio volatility is a measure of risk contribution of a position (expressed in volatility), accounting for correlation between positions held at the portfolio level. It represents the level of volatility of a specific position vis-a-vis the global portfolio.
Contribution to portfolio volatility of a position is equal to ωi x βi
with β = Ω x ω / volatility and Ω a covariance matrix with an exponential smoothing (α = 99%).
The volatility of the portfolio is equal to the sum of the contributive volatility of each position.

Margin to Equity

Margin to Equity figures are estimates. They are calculated using exchange margin requirements. Margin to equity is calculated using the sum of estimated initial margin divided by NAV.
Actual margin requirements may vary and margin analysis provided is not intended to be an accurate representation of actual initial margin requirement or margin to equity ratio.

Global Economic Factor ("GEF")

The Global Economic Factor ("GEF") is a proprietary indicator which measures the strength of global economic trends to optimize portfolio exposure. The GEF can vary anywhere from 0.5 to 1.5.

Value at Risk

Value at risk (VaR) is a measure of the risk of loss for investments. It estimates how much a set of investments might lose over a target horizon within a given level of confidence. KeyQuant’s Risk Management Team estimates VaR using the historical simulation approach.

Conditional Value at Risk

The CVaR is derived by taking a weighted average of the “extreme” losses in the tail of the distribution of possible returns, beyond the value at risk (VaR) cutoff point. It is estimated using the historical simulation approach and is equal to the average of the backtested returns which are worse than the VaR threshold for the same confidence level and given time horizon.

Historical Stress Tests

Historical scenarios have been selected by identifying events from 1990 to 2015 when markets have displayed large price movements.

A futures contract has a set expiration date. In order to analyze price trends and estimate risk, one needs to create a continuous futures price series by concatenating the different maturities of this contract.

SG Trend Index

The SG Trend Index is equal-weighted and reconstituted annually. The index calculates the net daily rate of return for a pool of trend following based hedge fund managers. A factor of 0.9 is applied to the SG Trend Index when compared to the Key Trends UCITS; a factor of 1.35 vs. the Key Trends 15 Fund; and a factor of 1.8 vs. the Key Trends 20 Composite. Click here to have more information: https://cib.societegenerale.com/en/sg-prime-services-indices/.

Sharpe Ratio

Sharpe ratio is a measure of excess portfolio return over the risk-free rate relative to its standard deviation. It measures the risk-adjusted performance of an asset. KeyQuant’s Risk Management Team calculates it by dividing the Annualized Return of the asset by its Realized Volatility and assume a zero risk free rate.

Downside Volatility

Downside Volatility is calculated like Realized Volatility but only negative returns are taken into account. It has been designed to address downside risk.

Sortino Ratio

Sortino Ratio is a modification of Sharpe Ratio where Realized Volatility has been replaced with Downside Volatility. Thus, it presents a more realistic picture of the downside risk ingrained in a financial asset.

Skewness

Skewness is a measure of asymmetry of a distribution function. The Skewness for a normal distribution is zero. Negative values for the skewness indicate data that are skewed left (i.e. left tail is long relative to the right tail).

Kurtosis

Kurtosis is a statistical measure that is used to describe the tails of a distribution. Distributions with high kurtosis (>3) exhibit heavier tail than the normal distribution. For investors, high kurtosis of the return distribution implies that the investor is more likely to experience extreme returns (either positive or negative) than it would be under the normal distribution.

Ulcer Index

The Ulcer Index (“UI,” or “Ulcer”) measures both the depth and duration of drawdowns and is one of the rare risk indicators that is path-dependent. Its return-adjusted version is a better indicator than the Sharpe Ratio for investors who are more concerned by drawdowns (vs. volatility). The name of the index comes from the supposition that drawdowns cause stress and ulcers to investors. Ulcer is calculated by taking the quadratic mean of the drawdowns.

Adjusted Leverage

Total notional amount for futures contracts (duration adjusted for bonds and interest rates).

Disclaimer

The site www.keyquant.com is a website dedicated to professional investors who are able to understand all of the information disclosed therein and the specific risks attached thereto.The information published on www.keyquant.com does not constitute a solicitation, offer or recommendation to purchase or sell investment instruments or to enter into any other transaction. It should not be used as a substitute for any form of advice.If you are not a professional investor, we invite you to refrain from accessing, visiting or using this website.

Performance figuresPAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

Country of residenceThis communication, provided for informational purposes only, is not intended as and is not to be taken as an offer or solicitation with respect to the purchase or sale of any process or interest, nor does it constitute an offer or solicitation in any jurisdiction, including those in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such a solicitation or offer. For the avoidance of doubt, none of the products www.keyquant.com may refer to are registered under the Securities Act 1933 of the USA nor are they registered under the Investment Company Act of 1940.

SourcesAll externally sourced information has been obtained from providers believed to be reliable, but its accuracy, timeliness, suitability and completeness is not guaranteed.

Linkswww.keyquant.com may also contain links to websites which are published by third parties and third party websites may also feature links to this website. KeyQuant has not reviewed any third party websites which refer to this website or to which this website refers for accuracy, topicality and / or completeness. KeyQuant declines any liability in this matter. The fact that a link has been created to a third party website or that permissions have been given to a third party website to contain a link to this website does not mean that KeyQuant approves or recommends neither any content nor any products or services offered on a third party website.

Exclusion of liabilityKeyQuant is not liable for any losses or damages arising in any way from (i) the information contained on www.keyquant.com, (ii) any information transmitted via www.keyquant.com or (iii) the functioning or non-availability of www.keyquant.com. KeyQuant is not liable for any losses or damages that may be caused to any equipment and other software due to any viruses, defects or malfunctions in connection with access or use of www.keyquant.com.

Communication onlineBy transmitting information via www.keyquant.com, you accept the risk that the information you transmit and any information transmitted to you may be intercepted and modified by a third party. Messages that you send by e-mail may not be secured. It is recommended that you do not send any confidential information by e-mail. If you choose to send any confidential information via e-mail, you accept the risk that this information may be intercepted and modified by a third party.

Intellectual propertyKeyQuant retains all rights in relation to all information contained on www.keyquant.com. You do not receive any license in relation to such information except for the limited purpose of online accessing and viewing of www.keyquant.com. You may not copy, publish, distribute or reproduce any of the information contained on www.keyquant.com in any form without the prior written consent of KeyQuant.

Personal dataKeyQuant acts as a data processor when processing your personal data within the framework of its asset management activities. To protect your personal data, KeyQuant will handle it in accordance with the policy attached as well as any statutory and regulatory requirements.

Disclaimer

The site www.keyquant.com is a website dedicated to professional investors who are able to understand all of the information disclosed therein and the specific risks attached thereto.The information published on www.keyquant.com does not constitute a solicitation, offer or recommendation to purchase or sell investment instruments or to enter into any other transaction. It should not be used as a substitute for any form of advice.If you are not a professional investor, we invite you to refrain from accessing, visiting or using this website.

Performance figuresPAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

Country of residenceThis communication, provided for informational purposes only, is not intended as and is not to be taken as an offer or solicitation with respect to the purchase or sale of any process or interest, nor does it constitute an offer or solicitation in any jurisdiction, including those in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such a solicitation or offer. For the avoidance of doubt, none of the products www.keyquant.com may refer to are registered under the Securities Act 1933 of the USA nor are they registered under the Investment Company Act of 1940.

SourcesAll externally sourced information has been obtained from providers believed to be reliable, but its accuracy, timeliness, suitability and completeness is not guaranteed.

Linkswww.keyquant.com may also contain links to websites which are published by third parties and third party websites may also feature links to this website. KeyQuant has not reviewed any third party websites which refer to this website or to which this website refers for accuracy, topicality and / or completeness. KeyQuant declines any liability in this matter. The fact that a link has been created to a third party website or that permissions have been given to a third party website to contain a link to this website does not mean that KeyQuant approves or recommends neither any content nor any products or services offered on a third party website.

Exclusion of liabilityKeyQuant is not liable for any losses or damages arising in any way from (i) the information contained on www.keyquant.com, (ii) any information transmitted via www.keyquant.com or (iii) the functioning or non-availability of www.keyquant.com. KeyQuant is not liable for any losses or damages that may be caused to any equipment and other software due to any viruses, defects or malfunctions in connection with access or use of www.keyquant.com.

Communication onlineBy transmitting information via www.keyquant.com, you accept the risk that the information you transmit and any information transmitted to you may be intercepted and modified by a third party. Messages that you send by e-mail may not be secured. It is recommended that you do not send any confidential information by e-mail. If you choose to send any confidential information via e-mail, you accept the risk that this information may be intercepted and modified by a third party.

Intellectual propertyKeyQuant retains all rights in relation to all information contained on www.keyquant.com. You do not receive any license in relation to such information except for the limited purpose of online accessing and viewing of www.keyquant.com. You may not copy, publish, distribute or reproduce any of the information contained on www.keyquant.com in any form without the prior written consent of KeyQuant.

Personal dataKeyQuant acts as a data processor when processing your personal data within the framework of its asset management activities. To protect your personal data, KeyQuant will handle it in accordance with the policy attached as well as any statutory and regulatory requirements.

Disclaimer

KEY TRENDS 20 COMPOSITE PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS. THEY ARE BASED ON A GROUP OF USD BASED TRADING
ACCOUNTS WHICH IS AMENDED FROM TIME TO TIME. THEY ARE NOT AUDITED. THEY HAVE NOT BEEN TRADED TOGETHER IN THE MANNER SHOWN IN THE KEY TRENDS 20 COMPOSITE.IN ADDITION, NO COMPOSITE TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. THEREFORE, NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT OR POOL WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO
THOSE SHOWN HEREIN. THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN COMPOSITE PERFORMANCE AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR ACCOUNT OR POOL.

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